June 13, 2022

UCL and Oxford are Europe's 'worst universities for spinouts'

A new survey by Air Street Capital raises questions about the effectiveness of Europe’s university spinout system. 

Zosia Wanat

4 min read

Oxford. Credit: Sidharth Bhatia/Unsplash

Universities should be a natural birthplace for Europe’s top innovative companies — but recent data suggests they’re not doing a great job turning researchers into business leaders. 

A survey of 143 spinouts — businesses converted from academic research with the help of an educational institution — by UK VC Air Street Capital found that European universities take more equity and control of spinouts than their US counterparts and that startups are generally not happy with their experience.  

Many investors — including Air Street — have lamented the fact that European universities haven’t created the kind of outsized successes that the US has. One reason given has been the amount of equity founders must give to university tech transfer offices, which, critics say, can put off future investors from committing capital. Others within the system say universities are successfully commercialising research


Nathan Benaich, Air Street Capital founder, says that academia should be a key element of boosting the European innovation ecosystem. “That engine is generally broken,” he says. “If we want to get to tech sovereignty, and, like, big companies, we have to fix the engine that creates these businesses in the first place.” 

Here are the top takeaways from Air Street’s survey:

1. Founders are generally not satisfied with their spinout experience 

The spinout founders aren’t usually satisfied with their experience with their universities: asked if they would recommend the commercialisation process to a friend or a colleague, in the scale from 1 to 10, the average mark they gave was 4.6. 14% of founders rated their experience with a zero. 

“If that were being a product, your business would be dead,” Benaich says.

Out of the most popular universities, the founders were the happiest with their experience at ETH Zürich and the University of Cambridge and the least satisfied with University College London and the University of Oxford. 

One of the biggest problems they have to face is the lengthy time of finalising deals: 67% of spinouts say that they had to wait more than six months to complete an investment. In comparison, a regular startup seed investment takes around three months to finalise. 

“If you're a software company, and you take more than six months, or God forbid, a year [to close a deal], you're dead,” Benaich says.

2. UK universities are the most greedy for equity 

The survey suggests that the European — especially UK-based — universities usually demand much more equity from spinouts than the American ones. An average equity rate taken upon founding reaches 19.8% in the UK while it’s as little as 5.9% in the American universities and 7.3% in European ones, the data shows.

This outlook gets even worse when zero-equity deals, popular especially in the Nordic countries, are taken out of the equation. In that case, the average equity rate demanded by UK universities rises to 23.6%, and the average rate in European academia almost doubles to 14%. 

“A lot of these zero ones generally tend to be software companies,” says Benaich. “A lot of the more aggressive ones tend to be like therapeutics devices, diagnostics.”

3. And UK universities want control over governance 

UK universities tend to demand a greater control over the management of spinouts than American and European ones; almost a half of spinouts formed at the UK universities have externally hired leadership, Air Street’s survey showed. 

British universities also have a greater tendency to install a member of their technology transfer offices in the spinouts’ management boards — it happens in 37% of cases. 

“It's, unfortunately, usually not the best people. It's the people that are sort of available,” says Benaich.

4. More strings attached for spinout founders in general 

Spinout founders in both the US and Europe often have to agree to some other financial arrangements with the universities apart from the equity shares. 45% of all analysed deals included the payment of royalties — a regular payback from net sales after a company reaches a certain revenue threshold. Most of those royalties are set at 1-2% level — but in some cases, they’ve exceeded 20%. 

The survey suggests that most of the high royalties are included in software companies deals. 

“If I'm a software company, and I'm using any revenue I have to increase my growth, why do I have to pay you a royalty in the super early days with my company when I could use that extra 5% royalty to actually hire more people?” Benaich says.


So-called exit fees — a fee a founder pays to the university if they sell a company — are rather uncommon, but in some extreme cases they could exceed 10% of the final sales price.

5. No pay-back

All the hurdles on the way to commercialisation are making spinouts’ founders less likely to support the universities financially in the future. Almost 64% of surveyed founders said that they’re not planning to make any donations to their alma mater, even if their business turns out successful.

“If you're creating an ecosystem, where your founders of spinouts are not happy … they're not going to evangelise for you, they're not going to give you any money — you're just shooting yourself in the foot,” Benaich says.

👉 Now read: Europe's top 10 'unicorn universities' 2022

Zosia Wanat

Zosia Wanat is a senior reporter at Sifted. She covers the CEE region and policy. Follow her on Twitter and LinkedIn